The Government Incentive Regulation Model and Pricing Mechanism in Power Transmission and Distribution Market

Abstract

The power transmission and distribution (T&D) market’s natural monopoly and individual information have been the impediment to improving the energy efficiency in the whole T&D market. In order to improve the whole social welfare, T&D market should be controlled by government. An incentive regulation model with the target of maximizing social welfare has been studied. A list of contracts with transferring payment and quantity of T&D are given to motivate the corporation to reveal the true technical parameter and input the optimal investment. The corporate revenue, optimal investment, and effort are proved to depend on its own technical parameter. The part of incentive regulation model ends with the optimal pricing mechanism of T&D market. At the end of this paper, we give a numerical example to explain our research and confirm its function graphically.